Reinventing Management at the Mashup: Architecture & Ideology

Reinventing Management at the Mashup: Architecture & Ideology

Large organizations of all types suffer from an assortment of congenital disabilities that no amount of incremental therapy can cure. First, they are inertial. They are frequently caught out by the future and seldom change in the absence of a crisis. Deep change, when it happens, is belated and convulsive, and typically requires an overhaul of the leadership team. Absent the bloodshed, the dynamics of change in the world’s largest companies aren’t much different from what one sees in a poorly-governed, authoritarian regime—and for the same reason: there are few, if any, mechanisms that facilitate proactive bottom-up renewal.

Second, large organizations are incremental. Despite their resource advantages, incumbents are seldom the authors of game-changing innovation. It’s not that veteran CEOs discount the value of innovation; rather, they’ve inherited organizational structures and processes that are inherently toxic to break-out thinking and relentless experimentation. Strangely, most CEOs seem resigned to this fact, since few, if any, have tackled the challenge of innovation with the sort of zeal and persistence they’ve devoted to the pursuit operational efficiency. Their preferred strategy seems to be to acquire young companies that haven’t yet lost their own innovation mojo (but upon acquisition most likely will).

And finally, large organizations are emotionally sterile. Managers know how to command obedience and diligence, but most are clueless when it comes to galvanizing the sort of volunteerism that animates life on the social web. Initiative, imagination and passion can’t be commanded—they’re gifts. Every day, employees choose whether to bring those gifts to work or not, and the evidence suggests they usually leave them at home. In Gallup’s latest 142-country survey on the State of the Global Workplace, only 13% of employees were truly engaged in their work. Imagine, if you will, a car engine so woefully inefficient that only 13% of the gas it consumes actually combusts. That’s the sort of waste we’re talking about. Large organizations squander more human capability than they use.

Inertial. Incremental. Insipid. As the winds of creative destruction continue to strengthen, these infirmities will become even more debilitating. Few companies, though, have made much progress in eradicating them. Most of the recommended remedies—idea wikis, business incubators, online collaboration, design thinking, “authentic” leadership, et al—are no more than minor tweaks. They are unlikely to be any more effective than the dozens of “fixes” that came before them. Remember T-groups, total quality management, skunk works, high performance teams, “intrapreneurship,” re-engineering, the learning organization, communities of practice, knowledge management, and customer centricity? All of these were timely, and a few genuinely helpful, but none of them rendered organizations fundamentally more adaptable, innovative or engaging. Band-Aids®, braces and bariatric surgery don’t fix genetic disorders.

To build organizations that are fit for the future, we have to go deeper, much deeper. When confronted by unprecedented challenges, like an inflection in the pace of change, the most important things to think about are the things we never think about—the taken for granted assumptions that are to us as unremarkable as water is to fish. The performance of any social system (be it a government, a religious denomination or a corporation), is ultimately limited by the paradigmatic beliefs of its members; by the core tenets that have been encapsulated in creeds and reified in structures.

Reflect for a moment on the development of constitutional democracy. Ancient and medieval societies were predicated on the “divine right of kings.” The sovereign was answerable only to God and royal edicts could not be countermanded. Society was ordered in descending ranks of royal privilege and everyone from dukes to peasants “knew their place.” To most of those who lived in this pre-democratic world, the idea of self-government would have been ludicrous, if it could have been imagined at all. Thankfully, a few brave souls like William Penn, Thomas Paine and Patrick Henry not only imagined self-government, but devoted their lives to making it a reality. Today it’s the imperial alternative that’s unthinkable.

Until we challenge our foundational beliefs, we won’t be to build organizations that are dramatically more capable than the ones we have today. Despite our best efforts, we will fail to build organizations that are as nimble as change itself. We will fail to make innovation an instinctual and intrinsic capability. We will fail to inspire extraordinary contributions from our colleagues and employees. If we’re serious about tackling the core incompetencies that afflict our organizations, we have to start by scrutinizing the architecture and ideology of modern management—two topics that aren’t often discussed in boardrooms or business schools.

Architecture: Beyond the Pyramid

Most of us grew up in and around organizations that fit a common template. Strategy gets set at the top. Power trickles down. Big leaders appoint little leaders. Individuals compete for promotion. Compensation correlates with rank. Tasks are assigned. Rules proscribe actions. Managers assess performance. This is the recipe for “bureaucracy,” the 150-year old mashup of military command structures and industrial engineering that constitutes the operating system for virtually every large-scale organization on the planet.

Ask just about any anyone to draw a picture of their organization—be it a Catholic priest, a Google software engineer, a nurse in Britain’s National Health Service, a guard in Shanghai’s Hongkou Detention Center, or an account executive at Barclays Bank—and you’ll get the familiar rendering of lines-and-boxes. This isn’t a diagram of a network, a community or an ecosystem—it’s the exoskeleton of bureaucracy; the pyramidal architecture of “command-and-control.” Based on the principles of unitary command and positional authority, it is simple, and scaleable. As one of humanity’s most enduring social structures, it is well-suited to a world in which change meanders rather than leaps. But in a hyperkinetic environment, it is a profound liability.

A formal hierarchy overweights experience and underweights new thinking, and in doing so perpetuates the past. It misallocates power, since promotions often go to the most politically astute rather than to the most prescient or productive. It discourages dissent and breeds sycophants. It makes it difficult for internal renegades to attract talent and cash, since resource allocation is controlled by executives whose emotional equity is invested in the past.

When the responsibility for setting strategy and direction is concentrated at the top of an organization, a few senior leaders become the gate keepers of change. If they are unwilling to adapt and learn, the entire organization stalls. When a company misses the future, the fault invariably lies with a small cadre of seasoned executives who failed to write off their depreciating intellectual capital. As we learned with the Soviet Union, centralization is the enemy of resilience. You can’t endorse a top-down authority structure and be serious about enhancing adaptability, innovation or engagement.

Ideology: Beyond Conformance

And what about ideology? Business people typically regard themselves as pragmatists, individuals who take pride in their commonsense utilitarianism. This is a conceit. Managers, no less than libertarians, feminists, environmental campaigners and the devotees of Fox News, are shaped by their ideological biases. So what’s the ideology of bureaucrats? Controlism. Open any thesaurus and you’ll find that the primary synonym for the word “manage,” when used as verb, is “control.” “To manage” is “to control.”

Managers worship at the altar of conformance. That’s their calling—to ensure conformance to product specifications, work rules, deadlines, budgets, quality standards, and corporate policies. More than 100 years ago, Max Weber declared bureaucracy to be “the most rational known means of carrying out imperative control over human beings.” He was right. Bureaucracy is the technology of control. It is ideologically and practically opposed to disorder and irregularity. Problem is, in the age of discontinuity, it’s the irregular people with irregular ideas who create the irregular business models that generate the irregular returns. In this environment, control is a necessary but far from sufficient prerequisite for success.

Think of Intel and the extraordinary control it must exert over thousands of variables to produce its Haswell family of 14-nanometer processors. This operational triumph is tempered, though, by Intel’s failure to capitalize on the explosive growth of the market for mobile devices. More than 60% of Intel’s revenue is still tied to personal computers, and less than 3% comes from the company’s unprofitable “Mobile & Communications” unit.

Unfettered controlism cripples organizational vitality. Adaptability, whether in the biological or commercial realm, requires experimentation—and experiments are more likely to go wrong than right—a scary reality for those charged with excising inefficiencies. Truly innovative ideas are, by definition, anomalous, and therefore likely to be viewed skeptically in a conformance-obsessed culture. Engagement is also negatively correlated with control. Shrink an individual’s scope of authority, and you shrink their incentive to dream, imagine and contribute. It’s absurd that an adult can make a decision to buy a $20,000 car, but at work can’t requisition a $200 office chair without the boss’s sign-off.

Make no mistake: control is important, as is alignment, discipline, focus, accountability and all the other liberty-limiting virtues so beloved by accountants and engineers—but freedom is equally important. If an organization is going to out-run the future, individuals need the freedom to bend the rules, take risks, go around channels, launch experiments and pursue their passions. Unfortunately, managers often see control and freedom as mutually exclusive—as ideological rivals like communism and capitalism, rather than as ideological complements like mercy and justice.

With it’s one-sided exaltation of control, bureaucracy is ideologically lop-sided. To overcome the core incompetencies of the corporation, management practitioners and theorists must devote themselves wholeheartedly to the task of bringing the ideologies of control and freedom into equipoised tension. One ideology cannot win consistently at the expense of the other.

Bureaucracy must die

The most profound challenge facing 21st-century leaders can be simply stated: How to reap the blessings of bureaucracy—control, consistency and predictability—while at the same time killing it. Bureaucracy, both architecturally and ideologically, is incompatible with the demands of the 21st century.

Some might argue that the biggest challenge facing contemporary business leaders is the undue prominence given to shareholder returns, or the fact that corporations have too long ignored their social responsibilities. These are indeed challenges, but they are neither as pervasive nor as problematic as the challenge of defeating bureaucracy. First, only a minority of the world’s employees work in publicly-held corporations that are subject to the rigors and short-comings of American-style capitalism. Bureaucracy, on the other hand, is universal. Second, most progressive leaders, like Apple’s Tim Cook or HCL Technologies retired CEO, Vineet Nayar, already understand that the first priority of a business is to do something truly amazing for customers, that shareholder returns are but one measure of success, that short-term ROI calculations can’t be used to as the sole justification for strategic investments, and that, since corporate freedoms are socially negotiated, businesses must be responsive to the broader needs of the societies in which they operate. All this is becoming canonical among enlightened executives. Yes, work still needs to be done to better align CEO compensation with long-term value creation, but that work is already well underway. And while some CEOs still grumble that Anglo-Saxon investors are inherently short-term in their outlook, their argument breaks down the moment you realize that investors are typically happy to award fast-growing companies with a price-earnings multiple that is many times the market average. Simply put, at this point in business history, the pay-off from reforming capitalism, while substantial, pales in comparison to the gains that could be reaped from creating organizations that are as fully capable as the people who work within them.

I meet few executives around the world who are champions of bureaucracy, but neither do I meet many who are actively pursuing an alternative. For too long we’ve been fiddling at the margins. We’ve flattened corporate hierarchies, but haven’t eliminated them. We’ve eulogized empowerment, but haven’t distributed executive authority. We’ve encouraged employees to speak up, but haven’t allowed them to set strategy. We’ve been advocates for innovation, but haven’t systematically dismantled the barriers that keep it marginalized. We’ve talked (endlessly) about the need for change, but haven’t taught employees how to be internal activists. We’ve denounced bureaucracy, but we haven’t dethroned it; and now we must.

We have to face the fact that any change program that doesn’t address the architectural rigidities and ideological prejudices of bureaucracy won’t, in fact, change much at all. We need to remind ourselves that bureaucracy was an invention, and that whatever replaces it will also be an invention—a cluster of radically new management principles and processes that will help us take advantage of scale without becoming sclerotic, that will maximize efficiency without suffocating innovation, that will boost discipline without extinguishing freedom. We can cure the core incompetencies of the corporation—but only with a bold and concerted effort to pull bureaucracy up by its roots.

Paddy has an interesting point. In a world of mass-production, of mass-consumption, driven by mass-media, it’s very hard to achieve much in the . Pretty soon, self-interests will split the organization apart, and, as Jim Lavoie said, "nobody is as smart as everybody". There are ways and means to establish a collaborative mode of management. And that is not optional. Sustainable performances including through innovation depend on collective content creation.

I haven't read anything as thought-provoking as this blog from Gary Hamel and the responses and comments from readers in a long, long time. It's made me go back and re-read it a few times and he's dead-on in everything he's said. I know, because I've lived it as a corporate executive for a long time. The theme here is closely related to another theme that fascinates me - the future of employment from an employee's viewpoint, about which I wrote an article recently where I've argued that the future is Singular- in other words, driven by individuals acting for their interests in a self-directed way and treating every "job" as just another gig, the way a free agent would do. I would not be surprised if large corporations eventually implode and become a part of government, or splinter into multiple small entities with self-governing leadership structured as loose collaborations among peers. Thank you, everyone for sharing your thoughts.

Ian's "Open Strategies" describes well and in detail what we know as "collaborative mode of management". However, at least in my approach, the collaborative mode of management is not limited to the operations, but it starts (1) with a collaborative mode of setting the business strategies, and it chains on (2) with their organizational deployment, normally down 3 levels in the business divisions, and across the organization.

To that effect, the Japanese "Hoshin Kanri" * is a practical and well-structured method, which I have expanded on in my last book **. Linking up the strategic and the operational management and applying throughout the collaborative mode is essential because this is where the architecture of the business strategies (what, who, how) is laid out, and thusly the ground work is set for the organizational deployment.

At the 3 levels of the organizational deployment, the teams develop the networks (inside and outside the enterprise) that need to join forces so as to achieve the shared objectives. Networking is a key concept of the collaborative mode of management. The Hoshin Kanri and my Process of Strategic and Organizational Deployment provide a strategy-driven base for developing the web of interactions that enable the project-teams to optimize the collective content creation.

* Prof. Yoshi Akao "Hosin Kanri" Productivity Press 1991. N.B. The "Deming Price" and the award of the European Foundation for Quality Management require that applicants show the implementation of a strategic deployment.
** W. A. Sussland "The Innovative Enterprise" Create Space 2014

Building skills for the 21st century ~ OpenStrategies has created an approach and a set of principles that describe how organisations can work together, 'joining-the-silos' of bureaucracies and making them more effective.

The simple framework created by OpenStrategies allows organisations who create assets (products, services and infrastructure) to be more effective in enabling people (customers and citizens) to use them to create benefits.

OpenStrategies’ ability to validate these strategies and action plans means that the work is more effective at improving benefits for customers and citizens:

i. Break big units into smaller units, thereby creating more opportunities for individuals to become full-fledged business leaders (but joining them up using OpenStrategies).

ii. Support the formation of informal teams and “self-organizing” communities where “natural leaders” get the chance to shine (a core OpenStrategies’ principle is to enable people to “earn the right to lead, not take control”).

iv. Syndicate the work of executive leadership by opening up the strategic planning and budgeting processes to everyone in the organization (OpenStrategies specifically enables multi-stakeholder strategic planning).

v. Systematically de-emphasize the formal hierarchy in favour of more fluid, project-based structures (OpenStrategies enables groups to link-up naturally without the need for command-and-control).

vii. Distribute the work of critical staff functions by giving associates at all levels the opportunity to help reengineer core management systems and processes (OpenStrategies interlinks strategies at all levels, across organisations, across demographic groups and across topics).

viii. And perhaps most importantly, systematically train individuals in the art and science of “leading without power” (OpenStrategies enables effective people to “earn the right to lead, not take control”).

These OpenStrategies (NZ) principles are summed up by Dr Driver, the founder, when he states that:
‘anyone can design a complicated strategy system but a good designer will develop a simple one’. The resulting OpenStrategies’ system is compellingly simple yet powerful, even for very complex, large scale strategies. Crucially, OpenStrategies doesn’t just underpin the design of strategies – it also guides their validation and implementation.

Gosh, those previous comments really remind me of the world I used to work in, it brings back the injustice and dysfunction that was so much of a distraction from actually doing a good job- constantly second guessing the bureaucracy -then the politics- then second guessing the personalities, whist still being trapped by the actual physics/maths of the problem on my desk!

You need more "emotional intelligence" they'd say..... hmmm.

5 X 6 = ?
A different number depending on how I feel?
Depending on how others feel?

How about everyone else needs to be grounded in reality BEFORE we add on all the feelings?

......See how much upset is triggered in me when I recall those trapped, impotent, frustrating days.

I'm so glad those days are behind me.

Working with responsible people is so great, there's loads of arguing and exploring- but only ever about the problem of 5 X 6 = ?, a problem that we are all trying to figure.

No one is trying to grift the system or stand on the shoulders of others.

Do some managers feel threatened to allow suggestions for innovation? A manager with a good self-esteem will encourage innovation suggestions. It seems some managers, old school, new school, baby boomers; x-y-z generations do know we live with consumers who almost do not want instant gratification but estimation of their need requirements. What a lovely challenge to have!

This is a systemic structural issue. Pyramidal organizations need scapegoats when the stuff hits the fan and the innovator can be the first target. The recent New York Times article, ‘A Fatally Flawed Switch and a Burdened GM Engineer’ tells the story of Raymond DeGiorgio a conscientious mid level engineer employed by General Motors. DeGiorgio chose the switch that may have caused at least 30 deaths and untold injuries over the last ten years. GM sacked DeGiorgio in June this year and the organization has been keen to point the finger at him. But there are many threads to this story. Documents show that DeGiorgio raised his concern about the switch to a high level GM product committee and tried to have it replaced but his request was knocked back. So he secretly worked with the switch’s manufacturer to ensure only improved versions were supplied and that new cars no longer suffered from the defect. According to GM he exceeded his authority.

As Admiral Hyman Rickover observed, ‘If you are going to sin, sin against God, not the bureaucracy. God will forgive you but the bureaucracy won't.’

For comments about alternative structures and references please see my earlier comments to this post.

Yes Peter, "Keep your head down" is the first rule for succeeding in a bureaucracy so it is not surprising innovation and efficiency are hampered and people do not perform to their full potential. The second rule is "Do well what the hierarchy wants." This will lead to promotion and hence perpetuation of the Achilles heel of bureaucracies - resistance to change to meet the needs and wants of "customers".

With his great style, Gary set out basic problems affecting traditional organizations. Let me add to the many insightful comments, a few lines on applying the systemic approach to change.

Management is a complex eco-system where many internal and external factors interact. The systemic approach seeks to identify the key factors, to understand their interactions, and to distinguish between the driving and the trailing factors. To change the system, we have to start by changing at least one of the driving factors, and to set off a chain reaction that – if properly managed - will change the web of interactions among all the major factors. (1)

My model puts the following 5 key factors at the core of the management system, namely: the strategy fundamentals, the style or the mind-set of the leadership, the systems of management, the structures of the organization, and the shared knowledge. I refer to them as the 5 of the Corporate Capital. (2)

The mind-set at the top of the leadership of the organization is a fixed mental attitude that conditions the point of view, and that predetermines what is seen as important and how things are evaluated. Thusly, the mind-set at the top shapes the business strategy and the systems of management, which facilitate and organize how things are done and evaluated.

The mind-set at the top of the leadership should shape the collective mind-set. However, the discrepancies or the displacement of the mind-set of the leadership will confound the collective mind-set. (3) The collective mind-set must be in line with the evolution of the markets. However, the mind-set of the leadership may clog up the view on the changes or it distort the implementation of the necessary organizational changes. W. E. Deming stated that 80% of the organizational dysfunctions are attributable to the leadership, which is the architect and the custodian of the management system.

External and internal factors can cause the leadership to change its mind-set. The external factors, however, may lead to belated and compelled reactions, and to convulsive changes. Conversely, the internal factors can be very powerful. The board of directors can change the mind-set by changing the CEO. For example the chairmen of the Ford Motor Company and of Fiat brought in an innovative executive from a different industry to take the helm of their company, respectively Alan Mulally and Sergio Marchionne. The new CEO changed some of the top managers who in turn changed some of the systems and structures of the organization. The strategy fundamentals were altered to bring in a new vision.

Internal changes can also push bottom/up. The teams that develop a powerful portfolio of innovations, and that butt against the rigidities of the traditional organization can put pressure on the top management to lift some of the roadblocks that burden their innovative work. They will also diffuse the innovation spirit by networking throughout the organization.

The Internet has emancipated ordinary people who base their power on their knowledge. The talents that find themselves stymied by a rigid, authoritarian regime will either move on, or then hang up their brain and their coat when they come to work and pick them up when they leave. The ensuing brain drain will further increase the vulnerability of the traditional organization.

Last but not least, we have to take into account the resistance and reluctance at the top to engage in a program of management innovation that can be risky, long winded, and that can confuse everybody. Yet, , and if the executives sees the way to carry out changes effectively that will rise their resolve. Since John Kotter (4) a number of authors - including myself - have proposed programs of management innovation that provide the leadership assurance as concerns the rate of success, and the effectiveness of the program. That, in my opinion, is the gateway to a successful program, it releases the handbrake to enable a forward movement.

Graham- great discussion, it's a two way street- thank you for your very thoughtful contribution.
These issues are VERY hard to think about.

In my work, it was my opportunity to explore with others that made all the difference.
I guess we are all subject to our personal blind spots.
We are, after all only human- I come back to the last 2 of the 6 words – “better together”.

Before I go, can I just offer one last thing from my 10 years of experience in operating a “self-managing” system.

I want to talk about a problem that can really test any such system, it is a problem hidden in the system- and as our system is the same as the wider system- perhaps it sheds light onto this too.

It’s the problem of “subsistence”.

This is not a problem of the “dog-eat-dog” world that so many believe capitalism is; actually it’s the problem hidden in the simple rule of “property rights” (which is also necessary for capitalism).

This is why my first question of all alternative systems is… who has rights over the resources.

Anyway- the problem.

Some colleagues will husband their resources only to the degree that they “subsist”.

That is to say, they don’t create much of a surplus for others, they really only meet their personal needs.

For a long while this is not a problem; at least they are not a burden on others -right? No one has to subsidize them.

This seed is sown when the organization converts to a self-organizing system or the new organization starts out this way.
Resources have to be spread about somehow, and people are given “rights” to them.

Let me use the analogy of farmers. The land is shared out between people. Some good people get good land, some poor farmers get poor land- and all options in between.

The poor farmers with the poor land tend to fail quick as they have the biggest difficulties. And the poor land gets redistributed (bought up).

Over time the farmers get better and the land is redistributed. The BEST farmers often end up with the worst land- it is only they who can make it work… specifically it is only they who are willing to buy it, because it is worth something to them in the future.

Of course the corollary is also true, the BEST land will also often have the worst farmers.
They who have to do least to get by. Their land is flat and fertile.

They get up at noon and just go browse the bounty. They are the problem “subsisters”.

You might imagine the susbisters "scratch a living on the worst land"- but they get to be good farmer or they are forced give up farming (by their own hand). It’s those sat on the good land who are the problem.

This is where the problem arises for the self-managed organization.

The other colleagues start to rumble that “it’s not fair, if I had access to those good resources I could do better, I would produce a surplus and the organization would be better off”.

They start to rub up against that “property rights” rule.

“Surely this can’t be right- we are no better off than we were when we had managers …rubbish managers hogging all the best resources…. self-management is no better”.

“For the good of the organization these good resources should be taken from those who have it and given to those who need it”.

This as you can see is the call of the socialist.

It’s hard in this moment to resist such a call for reform, especially hard when things are tough and those good resources are going unworked, and even harder still when many people see the logic of breaking the rule…. "just this once". The benefit to the organization as a whole is not being maximized. There is an imbalance.
It is really hard to resist the change.

But down that road dragons lie.

The rule is there because it facilitates the system, breaking it brings the whole system down.

In my experience, if you can hold out the gains are greater.

My experience is that people are not the same all the time, and circumstances change too.

Eventually the “subsister” runs foul of “double witching”- a period of a bit extra laziness AND a bit tougher circumstances. At this point they go into crisis and HAVE to part with at least some of their resources to tide them over (they built up no reserves). This is a voluntary transaction, and it is how they rescue themselves
.
The result is that they consequently have to do significantly better with what they have left- they raised the bar on themselves. And so on.
The system has a self-correcting mechanism- if you stick to it.

Don’t break the rules.

The problem is that the more efficiently resources are used the more resource quality and skill level and circumstances separate the performance of individuals.

Rule testing becomes more regular as they hit the rule boundaries more regularly.

The only possible solution is for the group to diversify more, but its always tempting to re-distribute.

The problem of resource ownership (property rights) will always become the greatest test of the system.

It’s the heart of the problem of hierarchy and it’s the ever present test for self-managing systems also.
Either system must have this rule really NAILED down, because if it gives way the system is done for.

In hierarchy that’s done by force, in self-managed systems it’s done by consensus.

It’s difficult for the colleagues to maintain the perspective that overcoming difficulties moves them forward, rather than believing they can be avoided.

The colleagues will always get the results they deserve, as do voters.

Graham said: "Nonetheless, although normally self-effacing, I am rather attracted to the idea of naming boards of federations "Grahams". As you will see from my website I overcame my self-effacing tendency by naming the template governance policies for federations Douglas Integrative Governance."

Ha, yes I noticed that. "The Douglas Integrative Governance".

Just to be clear- I'm not claiming any great invention or system- I just copied an existing system (for larger groups like countries) and put it into business.

Like several others seem to have done simultaneously.

The only difference I would claim is that we have not got anything "special" in our system- its a direct translation of the wider system- a "fractal" approach. Just go out and copy it yourself- you certainly don't need my help!

I'm not interested in identifying myself with the idea- it is "free-ware" as far as I'm concerned.

All that dynamic instability stuff I mention is in the bigger system too.

The only difference is that instead of figuring it as a "fault", I eventually realized it was a feature and STOPPED my attempts to "fix" it. Indeed, I optimised it- oiled it and set it straight.

My understanding of "entropy in system control" suggests that the costs of subversion will always overcome the benefits. Intervention to prevent system failure will always end up costing more than the failure that is being prevented.

So it is with empire. Empire becomes voracious in its consumption of resources and eventually strip mines its habitat.

What happens is that every successful subversion to prevent failure increases the stress in the system and the pent up pressure for failure. Thus the next intervention becomes more costly and requires tighter control.

The more manipulated the system, the more pressure for change it builds up in it, and the more difficult to keep it going. Its just dynamic instability.

The problem is however that lots of intervention means big internal pressure, when the failure eventually occurs it becomes catastrophic- it crashes the economy rather than simply stumbling it.

Lesson- don't subvert the set-back mechanism, the set-backs are not faults-- they are the self cleansing system that makes it sustainable- it cleans out the "fixed bits". There is no sustainable "fixed" systems.

The system is not designed to grow bigger forever, its designed to change and evolve- that may mean smaller- you can't fix the problems of the system to make it sustainable- it has a breaking mechanism in it so it innovates and evolves quicker.

Thanks Julian for this very lucid explanation of your approach. It could only come from a very knowledgeable and creative mind. However, in my experience, few are as knowledgeable and creative as people like you. It is for this reason I developed the Integrative Federation model to facilitate the building of organisations which can evolve and in which their members can develop full potential.

I have enjoyed this little discussion and hope other participants have too.

I have to say the challenge that underpinned Charles and Graham comments went right over my head!

I get what you are saying now.

Ok, let me start by saying the scope of my work was to rescue a failing business, one that was failing due to the inherent weakness in hierarchy. It was not so much despotism, but really just poor engagement, poor productivity and poor innovation.

Plus I guess, being selfish. I wanted to make my quality of life much better and the fix for that was to link the quality of my life to the quality of my colleagues, if their life got better so did mine. Its been win-win (for customers too- so that's win-win-win).

I can see you guys figure this sort of work as a greater "social movement".

Of course I have considered the longevity of the model and its wider applications but primarily I had a problem to fix in the here-and-now.

How to make it permanent? I figured I couldn't. Nothing much in nature has that immortal permanence so I gave up on that pretty quick as I tried to explore a long term fix to that problem.

My solution was to make my system self sustaining until the colleagues of the day fiddle with it to the extent that they break it. As you say- vested interests borne along by human nature (anxiety).

My system is designed to go into an unstable mode and self destruct -it has a self-amplifying feedback control loop.

So when the system is subverted rather than its control system constantly bringing it gently back into line, it will over shoot - then try to re balance with a bigger overshoot. Rather than having dynamic stability is has dynamic instability.

This solution is based on the variance of people. The system will not be subverted by all the people but a core group trying to avoid anxiety. The system will quickly go unstable. I figure that the individuals are better out of a dysfunctional system rather than trapped in it.

The individuals who can handle their inherent anxiety (the inherent anxiety of life) will reform and re-establish; it is their anxiety that makes up part of the dynamic feedback system.

Those that subvert because of their anxiety will be left to consume their assets.

As long as the anxiety is there it works, no anxiety- even in just a few- and it will self destruct.

As life cannot be lived without anxiety, the system will function properly.

However to reduce anxiety an individual subverts the system (to form a sweet spot where they can "harbour")- this sets the system unstable and it will break.

The survivors who can handle the anxiety will re-form because it works for them and always has.

I couldn't stop it being subverted-- I simply made it quickly break-up when it was subverted.

Kind of built in "recessions" rather than allowing pressure to build to "depression" levels.

Each recession kills off the dead wood- or specifically the "subverters", and this happens before those who can takes life's anxiety loose their skill set (its the loss of skill that renders everyone helpless, so break up must happen before this).

This bit of your post could be describing what can happen in cooperatives - and future federations. We are as one - sort of.

"This solution is based on the variance of people. The system will not be
subverted by all the people but a core group trying to avoid anxiety. The
system will quickly go unstable. I figure that the individuals are better out
of a dysfunctional system rather than trapped in it.

The individuals who can handle their inherent anxiety (the inherent anxiety
of life) will reform and re-establish; it is their anxiety that makes up part
of the dynamic feedback system.

Those that subvert because of their anxiety will be left to consume their
assets.

As long as the anxiety is there it works, no anxiety- even in just a few- and
it will self destruct."

There is a challenge however. It is the challenge that underpins Charles’ and Graham’s comments – human nature.

Benjamin Franklin understood the challenge when he replied to a woman eager to know the result of the 1787 Constitutional Convention.
‘Well Doctor what have we got - a republic or a monarchy?’ asked the woman.
‘A republic if you can keep it.’ Franklin replied.

Franklin understood the difference between framing the rules and finding ways to work within the spirit of those rules.

Peter Turchin, in his book ‘War Peace War’ documents the rise and fall of empire after empire. At first, the rules are framed by common consent. But then over time the rules get bent a little. Little by little they are bent to favor the elites at the expense of everyone else. At first there was a sharing of the burden of war. The leaders and their children fought and died as the nation state was developing. Then over the generations the children of the powerful felt more entitled to the land and the wealth produced by the many. That’s been the pattern Egyptian, Greek, Persian, Roman . . . . Spanish . . . French . . . British . . . The burdens are no longer shared as the elites expect more from the bottoms as their right. The ruling ideology becomes the ideology of the rulers.

But what is human nature?
Primatologists are showing us that our presumptions about hierarchy being hard wired are no longer valid.
Anthropologists are showing us that hierarchies amongst humans are a relatively recent phenomenon. Early man was almost certainly ‘Circle’ man. His paradigm was circular. He was part of the world not above it.
Social psychologists are showing us that ordinary people like you and me respond to positions of power and authority and powerlessness and lack of authority with predictable patterns of behavior. There is a tyrant in most of us. Just as there is a devotee of the ‘golden rule’.
And sociologists have shown us that we are profoundly affect by social structures. The hierarchical structure shapes our paradigm In literally a million ways.

And that is why we are stuck.

If we are to escape the pattern of War Peace War. If we as a species are to overcome the massive shock that is just over the horizon in the form of climate change we will need to organize our paradigms differently.

Amazing things are possible when people inhabit a different social structure.

If these ideas interest you. Check out an earlier post (see comment number 2) on this blog.
If you are interested in more see ‘Want to unleash human potential in others? Then make sure the good guys can flourish. Forget busting the bureaucracy. First blend with it. Then bend it.’ As part of the MIX contributions. 209 people have said they liked it.

Few individuals understand our evolutionary past and human nature. What’s even more alarming is that more and more people are drifting away from scientific inquiry and believe more and more in various made-up ideologies and faulty notions about our evolved predispositions. Until most people grasp who we “really are” as human beings there is little hope of developing human-centric organizations on a large scale.

Peter, that's pretty good I think....
I don't,
you could
together better.

My sniff test... does this work at city level?.... "I don't" ....works good ...although I gotta get on with something and if I don't ... who does?, "you could". hmmm- I'm happy not to be in charge.... but I'm not sure if I want You to be in charge..... I kind a like "we could", finally "together better"- yep I'm better off in the city. I just still want to be in charge of my own life.

"I do have difficulty working with people who seem to operate from the ‘I know, You don’t, My call’ paradigm."

I have stewardship over my resources so you can't tell me what to do with my resources.

3) Rational measures (KPI’s) common for all.

Both you and I are measured in the same way- so if my plan is good for me- isn't it also good for you? As long as my plan does not harm to you, then we should be good.

4) A performance review system designed at its heart to get people back on track not to expel them.

Perhaps you are trying to influence me through via a performance review, it may be that I'm stuck with your opinion- just like a shop in a city is stuck with someone who wont shop there.

5) Transparent or open book accounting. Access to all departmental processes and info.

I can look to try to understand what is motivating you through your performance and departmental processes, but its up to you to bring the discussion to me.

6) Each individual must add value to others (and “husband” the organizations resources) with compensation related to husbandry of resources (mastery).

I guess you add value to someone, but not to me.

7) No fixed titles, all activities must be open to all, free reign to pursue “individual purpose” in the service of others via Value Add. (Purpose) Transaction via mutually agreed contractual terms with internal and external partners.

This is a key one- if you are bossing me around- you are not adding value to me- perhaps I wont trade with you in the organization. I can't get rid of you, but I can certainly distance myself from you. Unless you have a key resource I need! This is a potential problem in supply chains.

8) The “system” should be open to all to question, explore and debate- it is theirs.

You don't have "authority" over me, but you have an opinion. If you think you need to change the rules- you go lobby - you can't do it unilaterally.

I think there are a bunch of ways these rules work to help a more social intercourse, although its true people will be people- some people will be just plain bossy.... and my ultimate sanction is to withdraw collaboration with you rather than be able to have to fight it out.

In my organization, I have seen two rather contradictory things- 1) people tend to communicate in a more direct, straight and adult way.... bordering on the blunt.
At the same time, 2) they tend to be less reactive to disagreements, as there is no power-play involved so actually they tolerate differences between them more. Its interesting to see two people who disagree on some things work so collaboratively together.

I'm not sure I really have a good explanation for it, other than to observe it. There is just so very little interpersonal angst compared to when we were a hierarchical organization- and yet still lots of disagreement and discussion and exploration.

I guess people behave better in functional environments, and badly in dysfunctional environments.

Five years ago members of the Australian Facilitation Network were challenged to encapsulate aspects of their work in six words or less.
After some time I came up with a statement that captured the hierarchical or pyramidal paradigm. It was;
I know
You don’t
My call

As in;
I know the answer.
You don’t know what I know and
Whatever you know it’s my call.

A little later I generated a statement that I believed captured a ‘partnership or parabolic paradigm’
I don’t
You could
Together better

As in
I don’t have the solution. (I might have some ideas though).
You could have a solution and I will take your comments seriously.
Whatever you or I think together will be better.

Over the last five years both ‘six word statements’ have been 'trialed' and tested in workshops and articles and so far stood the test of time.

I have no difficulty in relating to people whom I believe inhabit the ‘I don’t, You could, Together better’ paradigm. Indeed it is a joy to correspond with them.

I do have difficulty working with people who seem to operate from the ‘I know, You don’t, My call’ paradigm. I find an initial desire to get hooked into escalating
No you don’t and this is why you don’t . . .
Which inevitably leads to a . . .
Yes I do and this is why I do
Which in turn leads to a
NO YOU DON’T and you deliberately overlooked this . . . .
YES I DO how dare you say that . . . .

And so on.

I believe I am not alone. In fact Jonathon Haidt wrote a book about the phenomenon called ‘The Righteous Mind.’ And much of Daniel Kahneman’s book ‘Thinking Fast and Slow’ deals with the same phenomenon only he calls it ‘What You See Is All There Is’ thinking – which I call the {What I See Is All There Is} mindset.

Julian can you help me here? This mindset is one of the coterie of hierarchical paradigm mindsets. And it causes huge problems.

Can you help me understand how the rules that you have set out can help people overcome this minset? If you can I am all ears.

By the way if what I have written is of interest you may be interested in reading an earlier post of mine written at 8.16pm on Nov 7.

The problem with our criminal and civil law is that it has to determine the "controlling mind" of the organization because essentially the corporation in Law is a tax vehicle (transactions within organizations are not taxed where as external ones are) .. and as a tax vehicle is only a piece of paper.

They can't put a piece of paper in jail- so there is no sanction against it- there has to be a human on the hook- that is the purpose of determining the "controlling mind"- that's your jailbird... or "Gary" as we like to call him?

Every corporation MUST have at least one human to represent it- by law. The smallest possible corporation in Law is a person.

The "board" have the same problem- who is going to jail? They divide the corporate legal liability between them, so perhaps the accountant takes the hit...but they can't pass it on to subordinates because they are only bound by employment contracts (not an "officer" of the corp).
A group can't be a "controlling mind" in law because they can't jail a group for a common crime...... "well one of you suspects must have done it so we'll lock you all up!".

In my organization its me, I have my neck on the line. I take the legal risk.... oh and its my resources being deployed so I take the risk of loosing them too!

I'd love to get out of that- but its not my decision- its the law.

Your Federation can't distribute legal responsibility like a board in a corporation because they don't have the same legal standing (as the controlling mind- officers), your federation specifically tries to spread something that is not possible to do in the wider legal system.

The sort of problem you raise regarding a federated structure seems to be overcome in the case of cooperatives which are bottom up organisations. I am sure the ingenuity of man, which we are trying to set free from the shackles of bureaucracy, will develop legal and governance arrangements for federations which will punish the naughty Julians of this world. With each and every federation member looking after their individual interests there will be many more on the look out for Julians and they will not be inhibited by the hierarchy of a bureaucracy which now brands them as "whistleblowers".

Nonetheless, although normally self-effacing, I am rather attracted to the idea of naming boards of federations "Grahams". As you will see from my website I overcame my self-effacing tendency by naming the template governance policies for federations Douglas Integrative Governance.

Would not starting out with a set of rules for organisations be using the old hierarchical "command and control" approach we are trying to move away from?"

Good point Graham. However, a country or city also has to start with some kind of fixed rules- conventions on human rights etc.

So, I imagine (and operate) a system where as a team we start with -what do we have to do?
What rules govern us anyway... what are we stick with?

In the case of the organization- there are loads- from health and safety to financial law (like keeping accurate records). There are loads of these laws- the good news is that for every law forced on us we don't have to put one in ourselves.. As equal members of our organization, we don't have a choice about the laws of the land.

Next is the discretionary stuff. That's where we have some choice, some of those rules are kind of best practice or due diligence, then at last we get to the stuff we are in control of.
Lets get choosing! What colour would you like your cubicle?

Actually, there is no point in being too prescriptive about this last set of choices because ultimately the detail is going to have to change as the demands on us change...because of technology or competition etc.
Lets not prescribe the cubicle after all, just say we have to coordinate ourselves.

The important thing is really only to organize how we transact rather than what we must actually do.

But you are right that when there are rules to be followed there must be some sort of audit to be sure everyone is keeping within them (otherwise there is going to be a giant lawsuit).

Ultimately, your perception is correct Graham you do descend into the question of who "polices the police".

I think as long as the community remains in charge of the police and the police are not given a power of force way above that which can be wielded by the community then there remains a good balance.

My "sniff" test is.... does this apply to cities and countries? Yep!

Every country on earth has the same balance to strike, our little organization is no different. If we can do it as a community, surely we can sort this in our organization without resorting to a dictator?

These matters would be covered in the joint venture agreement and could be different in different federations. After all, the basic reason for establishing a bottom up federation is to free up the development of human and other resources so it is reasonable for members of the federation to decide.

My model federated structure is different from government federations in that it is designed from the bottom up, its units are of a maximum of about 150 people, the units have joint venture agreements with the federation which is governed by representatives of the units. A more detailed description and governance templates are available at my websitehttp://integrative-thinking.com/index.php?cID=99 .

1) Policies, Standards and Contracts defined via reason, commonly applied to all.
2) Organizational resources attributed to individuals for stewardship (Autonomy).
3) Rational measures (KPI’s) common for all.
4) A performance review system designed at its heart to get people back on track not to expel them.
5) Transparent or open book accounting. Access to all departmental processes and info.
6) Each individual must add value to others (and “husband” the organizations resources) with compensation related to husbandry of resources (mastery).
7) No fixed titles, all activities must be open to all, free reign to pursue “individual purpose” in the service of others via Value Add. (Purpose) Transaction via mutually agreed contractual terms with internal and external partners.
8) The “system” should be open to all to question, explore and debate- it is theirs.

I've set these up for others to add to. Its just my first guess- not some perfect list... tho, have a heart in your comments!

But I have put them here for you to throw rocks at, to make this list better.

Take the lists and add your ideas- you have to add ideas to both lists so that we can all give the idea a "sniff" test. If countries and cities could do it then so could organizations.

“In a federation, the self-governing status of the component states, as well as the division of power between them and the central government, are typically constitutionally entrenched and may not be altered by a unilateral decision of either party, the states or the federal political body”.

Graham, that sounds a bit like a CEO and a board of directors each responsible for a functional department.

Is that what you mean Graham?
That central government bit still sounds a little hierarchical.

Hi Gary-great insight into the need to form the organization of the future.
Some additional remarks on the challenges of global organizations:
The classic structures and relationships that had worked smoothly for an export-oriented domestic company were no longer appropriate as global engagement increased. This challenges was met with the rise of the matrix organization, which gained favor in the 1970s as a solution for large organizations struggling to coordinate decision making and activities that cut across functional and business-unit lines
Processes came to the fore during the business-process reengineering movement of the 1990s, which involved “rethinking and, if necessary, fundamentally reengineering how a company delivers value to its customers.
Continued advances in technology and connectivity have allowed companies to push well past process reengineering to new forms of engagement within and across organizational boundaries. see for detailed discussion:http://tmg-muenchen.hs-sites.com/blog/digital-platforms-the-future-of-gl...

But why do we want to act as if there is a merit in maintaining an organisation for its own sake? Organisations like all institutions have a natural lifespan and when it is over, it is right that it dies. The perpetuation of an institution for the sake of it is a typical bureaucratic approach.

We are also miles away from rebalancing the primacy given to shareholder or senior management returns in debates about the purpose of the corporation. Equating serving the consumer with taking society's needs into account actually reinforces the profit ideology of the system. We are all consumers but we are also all workers and all share a habitat. The system needs proactive ethics not just innovation for its own sake.

I agree the further up the pyramid one is the more one can insulate oneself from the impact of strategic decisions but I suspect this and bureaucracy are a function of scale. Perhaps small is beautiful afterall.

Of course I fully agree with Gary’s analysis and proposals . I judge also very important the role of cognitive resources (I prefer this term to “mindsets”). Anyway we have not go deeper enough
We tried to do that. Synthesis of results in the next few words.
The main characteristic of a human system is an autonomous capacity of self-evolution. We studied this evolution process using different metaphors for different stages of evolution: from the model, drawn from quantum field theory, of emergence as a symmetry breaking process to the model of autopoiesis, from the network model to the “Black hole” model, drawn from General Relativity. Taking into account this self-evolution process becomes immediately clear that problems enlightened by Gary are due to self-referentiality of organizational groups. First of all, from self-referentiality of top management.
Starting from the discovery of the self-evolution reality of an organization, the management problem is “How to govern this self-evolution process?”. I developed a methodology that I called “Sorgente Aperta”. This expression is the literal translation of “Open Source”, but in Italian the meaning change almost completely.
The first paper in English about all these things has been published in new management review http://www.intcpm.net/ojs/index.php/icpm2013/article/view/17/15
Anyway … Gary ... my compliments for your analysis and proposals …Francesco.zanotti@gmail.com

Why do you keep restating the same problems of hierarchical organizations, and asking the same questions about how organizations should be re-organized?

It’s not like you even have to do more than walk across the room and look out of the window. Every natural system is structured the same way, even most human systems are structured the same way.

The patchwork of countries that make up the global economy are arranged the same way, the countries themselves are arranged the same way (with the exception of North Korea and Cuba), the cities are arranged the same way, the people go about their lives in the same way.

There are two really familiar exceptions- families and organizations.

Families have top-down hierarchical structures because they have irresponsible kids- it's generally the same in nature (with the exception of the Cuckoo and the like), animal families are generally top down hierarchies for the same reasons- irresponsible off-spring.

We use the same “family” model in organizations; top down hierarchy; the implication being that employees are irresponsible, -like kids.

That’s the reason employees find it claustrophobic- they are treated like children- when they are not.

Gary, why do you keep asking “what is the nature of the problem”, and “what could be done”?

The answer is ALL around you, the same answer is written and re-written throughout history in story of the transition from monarchy to republics (top down to distributed systems).

Management mavericks are not re-writing the rules, this is a well-trodden path: they are just applying rules that worked out a hundred times before.

I even think there is a handy set of rules kicking around your house- do you remember those guys who said –

“hey, why should we be run by that King over there in England? Surely we can come up with a better idea between us- after all, we’re grown-ups?”

Didn't they write down some rules?

How did China suddenly build its economy in 35 years but by adopting many of the very same principles?
It’s the same problem, and the same solution.

Instead of this interminable re-examination of the problem, just go write down the 10 systems that countries adopted when they transitioned from monarchy to republics, transpose them into organizational rules and say:

“guys, here’s a list, go do this stuff in your organizations- we know it works”.

Gary, you could get that polished off by lunchtime on the 18th.
After that, have a break, .....take everyone to a show.

Sincere congratulations Gary, this is a wonderful summary of the problems of the ‘Pyramidal’ organizational paradigm.

Three further quotes and some comments if I may.

The challenge of inertia, according to Lew Platt former CEO of Hewlett Packard,
‘If only HP knew what HP knows, we would be three-times more productive.’

The challenge of sterility according to Karl Marx (wrong in many areas but in this area he seems right)
‘The ruling ideology is the ideology of the rulers’

The challenge of incrementality, according to Warren Bennis.
‘The key to competitive advantage will be the capability of leadership to create a social architecture capable of generating intellectual capital.’

One answer lies in understanding the implications of what the British sociologist Anthony Giddens called ‘structuration.’ Giddens was the first to describe the two-way connection between social structures and mindsets.

Social structures (like the hierarchy or pyramidal structure) shape mindsets and mindsets shape social structures. When we understand this we can understand why efforts to bring about mindset change have failed. The pyramidal structure would constantly, second by second, minute by minute, hour by hour etc. undermine any new change process.

But Giddens offered a new possibility.

Change the mindsets and you can change the structure.

We have been working with a number of clients to help them shift their mindsets from the pyramidal paradigm to those of the parabolic paradigm. In other words help them shift their mindsets from those that include.
{I Command and Control}
{I Manage Up}
{I Protect and Block}
{What I See Is All There Is} (with thanks to Daniel Kahneman)

To those that include

{I Lead With Others}
{I Work In Partnership}
{I Work to a Big Picture}
{I Search for Openness and Learning}

Of course this is not easy. The changes need to be evolutionary – not revolutionary. They need to be practical and make sense to people. And importantly they need to be in people’s heads. When enough people have made the transition they can request they operate under a new ‘parabolic structure’.

For a multi award winning client’s perspective see Mc Master, M. Learning to lead: a practitioner perspective, Journal of Higher Education Policy and Management 2014 Vol 36, No. 4, 430-439
For other comments on parabolic structures search the MIX database under Peter Rennie or consider emailing me direct. I will be happy to share what I know.

Warm regards and as Graham Douglas suggested best wishes for the MIX MASHUP.